Friday, August 29, 2014

August 27, 2014A little over a year ago, on July 23, 2013, Japan formally joined the negotiations to create the Trans-Pacific Partnership (TPP), one of the most ambitious trade negotiations ever. After a number of years of domestic debate and attempts by two previous prime ministers to persuade their coalitions to support it, the new Shinzo Abe administration had resolutely chosen a path toward all-out liberalization of trade and investment that could transform the Japanese economy. TPP had the potential to promote both Asia-Pacific economic integration and domestic reform. Today, however, the TPP process is in limbo and Japan’s commitment to comprehensive liberalization is in question. What does this mean for Japan’s economy going forward?

Japan in the Asia-Pacific EconomyDespite the old shibboleth that Japan’s economic miracle was due to “export-led growth,” Japan has in fact been a rather closed economy by many measures.1 This pattern began to change in the late 1980s, after the rapid appreciation of the yen that began with the 1985 Plaza Agreement. Japanese firms began to source more of their intermediate goods and components from other Asian economies; over time, these practices contributed to the development of extensive regional production networks (RPNs) for the manufacture of consumer electronics, information technology hardware, and (to a lesser extent) automobiles. RPNs allowed for a regional division of labor based on comparative advantage, creating opportunities for developing and middle-income countries up and down the supply chain.

Today, RPNs drive the bulk of East Asian intra-regional trade, with final production being exported globally. This is not simply about regional sourcing, as Japanese foreign direct investment and services trade have generally followed goods trade. Japanese banks, trading companies, and shipping companies have also built regional and global operations that support the needs and activities of manufacturers. To be sure, Japan and Japanese firms are no longer at the center of the regional economy; moreover, RPNs have contributed to the deindustrialization of Japan, creating considerable angst. Nevertheless, it is evident that Japan’s economic future lies in further integration into a regional Asia-Pacific economy.

Further integration of Japan into the regional economy will be the result of private-sector decisions and actions, as firms and banks make decisions about how best to serve existing markets and prioritize new ones. Still, government policies are important in shaping incentives.

TPP in Theory and PracticeThe concept of the TPP is to create a high-quality, “21st century” trade agreement that will be comprehensive in scope and promote deep integration among its members. It goes beyond existing regional trade agreements by reaching inside borders to address nearly every type of policy that has cross-border implications. The proposed reach of TPP includes rules that govern trade in goods and services, investment, competition policy, government procurement, e-commerce, agricultural policy, financial regulation, intellectual property rights, the activities of state-owned enterprises, labor, and environment. At least some of these disciplines would be enforced through an investor-state dispute resolution mechanism that would allow foreign investors to challenge domestic laws, further reducing the policymaking discretion of member states.

Thus, TPP is more than just a trade agreement. If the maximalist positions in each of its disciplines are adopted, it would have a transformative effect on the economies of many of the participating states, including Japan. For Japan, TPP addresses a number of Prime Minister Abe’s “third arrow” priorities, while also providing a backdoor means to a U.S.-Japan free trade agreement (FTA), which had long been considered politically infeasible. Externally, TPP would create new opportunities for Japanese firms to enter and do business on a level playing field with locals in the 11 other TPP countries. Internally, it could provide a bludgeon with which to advance the cause of structural reform: forcing Japanese farmers to improve efficiency and cost competitiveness, increasing competition into protected sectors like health care and legal services, and eliminating preferences for partially privatized institutions like Japan Post and NTT.

Theory is not necessarily the same as reality, however. Opposition to TPP runs deep in many participating countries, not only to the “21st century” issues (i.e., the “behind-the-border” issues, e-commerce, supply chain facilitation, intellectual property rights, environment, labor, etc.) but also the “20th century” issues of trade in goods and services. Twentieth century issues are perhaps particularly important between Japan and the United States, which are by far the two largest economies participating in TPP negotiations. According to numerous news reports, U.S.-Japan bilateral negotiations (which are ongoing, even though the formal TPP negotiating rounds are multilateral) have been bogged down by Japan’s unwillingness to fully liberalize agricultural imports. U.S. popular and political opposition to TPP is also strong, especially in the Rust Belt, where fears of competition from the Japanese auto industry run deep. U.S. legislators have shown their hostility to the negotiations by not passing trade promotion authority (TPA, or “fast track”). TPA, which requires Congress to vote up or down on trade agreements without adding amendments, has been an essential tool for passage of trade agreements for decades; without it, it is hard to imagine that the United States’ TPP partners would make their best and final offers or that the negotiations will be successfully completed. While some commentators have blamed Japanese intransigence over agriculture for the apparent slow pace of TPP negotiations since late 2013, it can also be argued that the Japanese government is holding out on making politically unpopular decisions until it can be sure that a deal is imminent—which will not be the case until (or unless) Congress passes TPA. For now, there is simply not enough evidence to make a meaningful judgment about the Abe administration’s intentions.

TPP and AbenomicsThe irony is that Japan stands to gain more from TPP than any other participant, at least in absolute terms.2 The reason is not primarily that Japanese firms will gain a great deal of market access in other TPP economies. Rather, the major gains are expected to result from removal of its own barriers to imports and domestic competition that have made bastions of inefficiencies out of a number of sectors from agriculture to textiles to legal and health services. According to economic logic, exposing these producers to greater competition will either make them more efficient or drive them out of business and shift resources to more competitive sectors.

To put it another way, a trade agreement with TPP countries is less important to Japan’s economic revitalization than large-scale domestic economic reform. The Abe administration shares this assessment of TPP as a domestic policy tool, and indeed several of the items in TPP mirror key elements of Abenomics’ “third arrow.” However, political resistance to such changes is significant, and there has been limited progress in advancing the structural reform agenda. The result is that the success of Abenomics structural reform has become closely linked with that of the TPP negotiations.

When Prime Minister Abe first came to power, time was on his side. He had a strong majority in the Lower House and was able to appoint accommodative new leadership at the Bank of Japan. After the 2013 Upper House election, he had strong majorities in both houses of the Diet and the prospect of three years without a national election. A year and a half into his administration, with little prospect of TPP being completed before mid-2015 at the earliest, however, the window of opportunity is closing. It appears that Abe can no longer count on TPP to be a silver bullet for structural reform.

What If TPP Continues to Languish?This raises the question of how Japan should move forward in terms of regional economic integration as well as domestic reform. Fortunately, despite the rhetorical commitment to TPP as a central pillar of both pieces of the economic agenda, there are other options. For the domestic agenda, the Japanese government’s best bet will be to continue with ongoing reforms, although priorities may shift as TPP sits on hold. With or without TPP, serious structural reform will inevitably be a matter of political will, and victory will not be dramatic but rather the result of an accumulation of incremental changes. Certainly, success is not assured. But serious progress is possible if the Abe administration starts acting with greater urgency on the third arrow.

As for trade agreements, the regional picture does not look promising. Not only is TPP in limbo, but negotiations with other major trading partners are either in preliminary stages or stalled. This is true not only of the ASEAN-centered Regional Comprehensive Economic Partnership (RCEP), but also of the Japan-EU, Japan-Korea, and China-Japan-Korea negotiations. While all of these partnerships could have a significant impact on Japanese growth and most would tie the Japanese economy more closely to the dynamism of East Asia, none is a near-term prospect.

Fortunately, regional negotiations do not represent a complete picture of the potential importance of trade agreements. The failure of the Doha Round makes it easy to overlook the successes of multilateral and plurilateral agreements under the World Trade Organization (WTO), including in recent years. Japan can benefit from a variety of recent or upcoming agreements, including the WTO Trade Facilitation Agreement, as well as the International Technology Agreement (ITA), which has succeeded spectacularly in eliminating barriers to much of the component trade that has underlain regional and global production networks in information and communications technology hardware; the Government Procurement Agreement (GPA); the Trade in Services Agreement (TISA); and the Environmental Goods Agreement (EGA). By addressing sectoral barriers to trade among coalitions of the willing, these plurilateral agreements have the potential to move forward Japan’s economic integration with its Asia-Pacific neighbors without the endless negotiations of a TPP or RCEP and the perils of getting stuck in the “noodle bowl” of multiple nonstandardized bilateral FTAs.

Economic Policy beyond TPPAll this is qualified good news for Japan. The TPP strategy had the potential to kill multiple birds—domestic reform, regional integration, and reinforcement of the U.S.-Japan alliance—with one stone. It is not necessary for any of them, however. Given the reality that TPP will not be concluded quickly (or, perhaps, even eventually), the Japanese government would be wise to focus on a combination of domestic reform and rededication to plurilateral initiatives like the ITA, TISA, and EGA. By doing so, it can advance the goals of shaping an integrated Asia-Pacific economy in which Japanese firms are confident and robust players.

1 Japan’s trade-GDP ratio is by far the lowest of any of the major East Asian economies; among industrialized countries, only the United States ranks lower on that measure (http://data.worldbank.org/indicator/TG.VAL.TOTL.GD.ZS). Inward foreign direct investment (FDI) has also been unusually low—with a cumulative inward FDI stock of $205 billion (3.4% of GDP), it is lower in absolute terms than FDI stock in Poland and by far the lowest relative to GDP among OECD countries (at 3.4%, far behind the next lowest OECD member, South Korea, at 12.8%) (http://www.oecd.org/investment/FDI%20in%20figures.pdf).) Among indicators of economic globalization, Japan punches in its weight class only in terms of outward FDI.

Monday, August 25, 2014

US-Japan Research Institute (USJI) holds an annual week of programs in Washington, DC on Japanese public policy featuring speakers from the Institute's associated universities in Japan.September 3 - 9 is this year's week of presentation and discussion.

USJI's mission is to produce practical research results based on a sound academic base, and to strategically establish a leading-edge research base in Washington, DC from which to announce its results and contribute to the policy discussion.

USJI is an APP member and APP interns will be assisting USJI interns at the events. Please say hello!

You can find more information and locations by clicking on each seminar's title.

OPPORTUNITIES AND CHALLENGES IN THE US-JAPAN ALLIANCE. 9/3, 10:00-11:30am. Speakers: Hiroshi Nakanishi, Professor, Kyoto University; Michael J. Green, Senior Vice President for Asia and Japan Chair, CSIS. What are the steps policymakers in Tokyo and Washington should take to further strengthen this essential relationship?

TEACHING THE JAPANESE AMERICAN EXPERIENCE IN THE UNITED STATES AND JAPAN. 9/9, 10:00-11:30am. Speakers: Jane H. Yamashiro, Visiting Scholar, Asian American Studies Center, University of California; Curtiss Rooks, Professor, Assistant Professor of Asian Pacific American Studies, Loyola Marymount University; Mitch Maki, Vice Provost, Academic Affairs, California State University Dominguez Hills; Yasushi Watanabe, Professor, Keio University. Examines the academic
narrative of the history of Japanese American
communities and how Japan can connect to them.

PM
(Local time in Trinidad and Tobago)
Informal talk with all leaders of the countries involved in Japan-Caribbean Community (CARICOM) at Hilton Hotel
Depart from Piarco International Airport on private government aircraft
(Local time in Colombia)
Arrive at El Dorado International Airport in Colombia’s capital city Bogotá

Tuesday, July 29, 2014

AM
(Local time in Colombia)Offer flowers at House of Simón Bolívar, memorial of independence movement leader
Conference with President of Colombia Juan Manuel Santos at La Moneda Palace, joint press release
Lunch meeting hosted by Mr. Santos at La Moneda Palace
Attend Japan-Colombia Economic Committee at National Federation of Coffee Growers of Colombia’s headquarters, give address
Informal talk with Japanese-Colombians at Hilton Hotel
Attend reception hosted by the Japanese government at Hilton Hotel

Wednesday, July 30, 2014

AM
(Local time in Colombia)
Depart from El Dorado International Airport in private government aircraft

Lunch meeting hosted by the President
Depart from Arturo Merino Benítez International Airport in private government aircraft
(Local time in Brazil)
Arrive at Brasília International Airport in Brazil

Friday, August 1, 2014

AM
(Local time in Brazil)Attend a meeting to exchange views with Brazil’s economic community
Informal talk with Japanese-Brazilian National Congress members and government officials
Attend gratitude for football (soccer) gathering,
Reception ceremony for Mr. Abe at Planalto Palace (Palácio do Planalto)
Summit Conference with President of Brazil Dilma Vana Rousseff

PM
(Local time in Brazil)
Joint press release with Ms. Rousseff
Exchange of views with Japan-Brazil Wise Men Group members at Brazilian Ministry of External Relations
Lunch meeting hosted by President Rousseff
Informal talk with representatives of group of Japanese-Brazilians at Japanese Ambassador to Brazil’s official residence
Depart from Brasília International Airport on private government aircraft
Arrive at Guarulhos International Airport on the outskirts of São Paulo, Brazil

Saturday, August 2, 2014

AM
(Local time in Brazil)Offer flowers at a cenotaph for Japanese immigrants to Brazil at Ibirapuera Park (Parque Ibirapuera) in São Paulo City. View Japanese Pavilion within park, plant commemorative tree
Press conference with domestic and foreign media at InterContinental Hotel
Attend seminar on medical regulations at Rosa Rosarum conference hall

PM
(Local time in Brazil)
Attend Japan-Brazil Business Forum in Rosa Rosarum conference hall, deliver commemorative speech
View Historical Museum of Japanese Immigration in Brazilian Society of Japanese Culture and Social Welfare headquarter building
Informal talk with Japanese-Brazilians
Welcome ceremony hosted by an organization of Japanese-Brazilians
Attend “Sport for Tomorrow” event at Tivoli Hotel
Depart from Guarulhos International Airport on personal government aircraft

Mainly due to a severe downturn in personal consumption stemming from the April 1 consumption tax increase from 5% to 8%, Japan's GDP in April-June tumbled a real 6.8% from the previous quarter on an annualized basis.

This is more than many had forecast including the IMF. Although a slow down of Japan's economy was expected, there remains uncertainty as to its longterm consequences. Will Japan grow again? Answers focus on Abe's "third arrow" of structural reform.

During his recent vacation Prime Minister Abe met with a number of his economic advisers both formally and over golf. It appears that maybe he may be having doubts about Japan's economic recovery expected from the Bank of Japan's quantitative and qualitative monetary easing policy introduced in April 2013. He appeared, if not for mere political expediency, listening to a number of competing opinions on the way forward.

Jackson Hole, Wyoming

On August 23, at the Jackson Hole, Wyoming, Federal Reserve of Kansas annual economic symposium among central bankers Bank of Japan (BoJ) Governor Haruhiko Kuroda focused his remarks [includes charts] on raising wages and promoting labor participation by women and elderly people. Once the BoJ succeeds in "firmly anchoring inflation expectations at 2 pct, this could provide the basis" for wage negotiations between labor and management, he said. He emphasized that increased labor participation rate of women and elderly was critical for staving off serious labor shortage due to the aging of population. Utilizing foreign workers also "deserve consideration," he added.

In an August 15th post, Structural Reforms Can Help Japan's Post-Consumption Tax Blues, on the IMF's blog iMFdirect, Stephan Danninger, a division chief in the IMF's Asia and Pacific Department, underscored the need for Japan to promote structural reforms quickly after the country's gross domestic product in April-June suffered the worst contraction in 13 quarters: "With the near-term outlook looking increasingly uncertain, the government needs to move quickly on the third arrow of structural reforms."

This paper was a was a follow up analysis IMF's annual staff report (Article IV Consultation) on Japan issued July 31st. The IMF believes Japan’s economy will grow by about 1.6 percent this year, before slowing to 1.1 percent in 2015 as a result of fiscal adjustment. Inflation is expected to rise temporarily to 2.8 percent on average for 2014 due to recent increase in consumption tax rate, and we expect the Bank of Japan’s 2 percent target will be achieved over the medium term. The report urged Japan to steadily implement its economic growth strategy and promote fiscal consolidation.

Uninterrupted structural and fiscal reforms are "vital" to the success of Abenomics, the IMF said. Noting that "further consolidation is needed to contain large fiscal risks," the IMF urged Japan to move ahead with an additional consumption tax rate increase to 10 pct planned for October 2015 after the 3-percentage-point hike to 8 pct in April this year.

Based on the staff report, the IMF Executive Board pointed out in a statement that "significant downside risks (to the Japanese economy) remain in the medium term, including those arising from fiscal vulnerabilities." The IMF board stressed "The best way to minimize these risks is the
steadfast implementation of all the elements of the government's economic strategy,"

There appears to have been a conference accompanying the preparation of the Consultation. Here are some of the papers presented.

Japan’s Corporate Income Tax: Facts, Issues and ReformOptions. Author/Editor: Ruud A. de Mooij; Ikuo Saito, IMF Working Paper No. 14/138.
Explores how corporate income tax reform can help Japan increase investment and boost potential growth. Using international and Japan-specific empirical estimates of corporate tax elasticities, investment is predicted to expand by around 0.4 percent for each point of rate reduction. International consensus estimates suggest further that between 10 and 30 percent of the static revenue loss could be recovered in the long run through dynamic scoring, although Japan’s offset may be closer to the lower bound. Compensating fiscal measures are necessary in light of Japan’s tight fiscal constraints. The scope for base broadening in the corporate income tax is found to be limited and some forms of base broadening will undo positive investment effects of a rate cut. Alternative revenue sources include higher consumption and property taxes. A gradual approach toward lowering tax rates mitigates windfall gains and reduces short-run revenue costs. An incremental allowance-for-corporate-equity system could boost investment with limited fiscal costs in the short run.

Is Japan’s Population Aging Deflationary? Author/Editor: Derek Anderson ; Dennis P. J. Botman; IMF Working Paper No. 14/139.
Japan has the most rapidly aging population in the world. This affects growth and fiscal sustainability, but the potential impact on inflation has been studied less. We use the IMF’s Global Integrated Fiscal and Monetary Model (GIMF) and find substantial deflationary pressures from aging, mainly from declining growth and falling land prices. Dissaving by the elderly makes matters worse as it leads to real exchange rate appreciation from the repatriation of foreign assets. The deflationary effects from aging are magnified by the large fiscal consolidation need. Many of these factors will beset other advanced countries as well, but we find that deflation risk from aging is not inevitable as ambitious structural reforms and an aggressive monetary policy reaction can provide the offset.

Balance Sheet Repair and Corporate Investment in Japan. Author/Editor: Joong Shik Kang; IMF Working Paper No. 14/141.
Traces Japanese firms’ behavior over the last decades using aggregate corporate balance sheet data. Financial health of Japanese corporate sector has improved and firms paid back significant amount of debt and rebuilt their liquidity buffers. They also expanded abroad while the pace of corporate investment moderated. Regarding the latter, model estimates on aggregate corporate investment over the post bubble period show that expectation about future profitability, in particular medium-term demand outlook, has been the major driver, implying that a successful implementation of structural reforms could have positive impact even in the near term by improving the medium-term demand outlook.

Health Spending in Japan: Macro-Fiscal Implications and Reform Options. Author/Editor: Masahiro Nozaki ; Kenichiro Kashiwase ; Ikuo Saito. IMF Working Paper No. 14/142.
Health spending has risen rapidly in Japan. We find two-thirds of the spending increase over 1990–2011 resulted from ageing, and the rest from excess cost growth. The spending level will rise further: ageing alone will raise it by 3½ percentage points of GDP over 2010–30, and excess cost growth at the rate observed over 1990–2011 will lead to an additional increase of 2–3 percentage points of GDP. This will require a sizable increase in government transfers. Japan can introduce micro- and macro-reforms to contain health spending, and financing options should be designed to enhance equity.

Future of Asia’s Finance: How Can it Meet Challenges of Demographic Change and Infrastructure Needs? Author/Editor: Ding Ding ; Raphael W. Lam ; Shanaka J. Peiris; IMF Working Paper No. 14/126
There is a role for Asia’s financial sector to play to address the challenges associated with the region’s changing demographics and infrastructure investment needs. Enhancing financial innovation and integration in the region could facilitate intra-regional financial flows and mobilize resources from the aging savers in industrialized Asia to finance infrastructure investment in emerging Asia. Strengthening the financial ties within the region as well as with the global financial markets alongside appropriate prudential frameworks could also help diversify sources of financing and reduce the cost of funding in emerging Asia. Finally, financial deepening could help ease the potential overheating from scaling up infrastructure investment and hence achieve a more balanced growth in the region.

Monday, July 21, 2014AM
12:00 At private residence (no visitors)
05:58 Depart from private residence in Tomigaya, Tokyo
07:02 Arrive at Three Hundred Golf Club, play golf with friends and secretaries. When asked “What is your mood while playing golf?” Mr. Abe answers “I’m enjoying myself, because spending time this way is the best.”

PM
(Local time in Mexico)
Agreement Signing Ceremony with President Peña Nieto at the National Palace [Palacio Nacional], and Joint Press Conference
Lunch meeting hosted by President Peña Nieto and his wife
Attend Japan-Mexico Economic Commission at Marriott Hotel and deliver address. Mr. Peña Nieto also attends

Saturday, July 26, 2014

AM
(Local time in Mexico)View National Museum of Anthropology in Mexico City with wife Akie
Travel by helicopter to ruins of Teotihuacán on the outskirts of Mexico City, view ruins with President Peña Nieto and his wife
When asked “This is where former Prime Minister Koizumi Junichiro spoke of postal privatization, but today, of what have you spoken?” Mr. Abe answers “I have spoken of ridding [Japan] of deflation and of [pursing] regional restoration. If we wish to reach the top [of the pyramid] it will come to be, so I want to make [these things of which I have spoken] certain.”

On July 30th two Korean former Comfort Women had extended meetings with White House and the State Department staff. They had traveled to Washington to celebrate the 7th anniversary of House Resolution 121 recognizing their sexual slavery to Imperial Japan's military and asking for an unequivocal apology from Japan's government.

As the Abe Government protests that their tales are fabricated, the rest of the world believes them more. This is reinforced by more scholarship and efforts of daughters and granddaughters to tell their mother's story.

Little, however, is said of the non-Korean victims of Japan's Comfort Women scheme. Most of the women, girls, and boys pressed to service and"comfort" the Imperial Japan's military were opportunities of war and occupation. The victims came from every city, plantation, territory and island occupied by Imperial Japan's military. The accounts of the brutal subjugation cemented by rape and pillage are amazingly similar whether they are told by Andaman Islanders or Singapore urbanites; Filipino peasants or Borneo headhunters.

Moentilan, Xavier College

None were more vulnerable than the women and girls who became prisoners in Japanese concentration camps in the Dutch East Indies. In the camps the Japanese officers chose at will, yet with deliberation, the women they wanted. Some, mainly British and Australian women, were survivors of ships bombed by Japan off the coast of Sumatra. They recall being given a choice: starve or submit.

Most, however, were Dutch girls and young mothers who had been forced from their homes into squalid and overcrowded locations, often former convents or schools. They were shut off from the world, with little food, limited sanitation, and surrounded by guards and barbed wire. The men and boys over 10 were sent off to slave on Burma-Thai Death Railway or other military projects. It is was never clear what was the intent or when would be the end of the internment. In late July and early August 1945, the consolidation of these internment camps and rumors from sympathetic guards suggested that the internees were all to be killed.

With some notable exceptions most of the hundreds of women forced to prostitute themselves for the Emperor never spoke of their experience or came forward to ask for compensation. The shame was too raw, too deep. It is therefore impossible to confirm the numbers of women subjected to this sexual abuse. Only 35 women were included in the 1946-47 Batavia War Crimes trial that charged 12 Japanese Army officers of having committed war crimes that included, for the first time "forced prostitution." The full records of these proceedings are sealed as are the names of the women involved until 2025.

Thus, the following news is unusual and deeply from the heart.

Dutch Woman Speaks About Mother's Experiences Of Sexual Slavery

By Chang Jae-soon, correspondent

WASHINGTON, Aug. 18 (Yonhap) -- Thea Bisenberger-van der Wal says she still remembers sitting on the steps of a church in Indonesia back in 1944 while waiting for her mother to come out. Her mother always cried but only told her, then aged 4, that she had fallen.

The mother never spoke to her of what really happened in the church for the rest of her life until she died 10 years ago, Bisenberger said, though she constantly suffered from nightmares because of the indelible experiences: sexual slavery by Japanese troops.

Bisenberger, now living in Canada, provided some details of what her mother went through in a letter to the Asia Policy Point, a nonprofit research center studying the U.S. policy on Northeast Asia. Mindy Kotler, director of the center, disclosed the letter to Yonhap News Agency on Monday.

Bisenberger has been calling for an apology from Japan.

It is not new news that Dutch women were among the victims of Japan's sexual enslavement during World War II, but the case shows the issue still remains unresolved not only for Korean victims but for victims of other countries as well.

At least 65 Dutch women were believed to be among the victims, known euphemistically as "comfort women." [NB: 79 women and men were willing to accept Japanese medical payments in the late 1990s]

"Not all the comfort women were Korean," Kotler said. "They were pressed into service on every island and territory invaded by Japan. The rapes were proof of victory and power for the Japanese and loss and humiliation for the conquered people."

Monthly Dutch Demonstration at the
Japanese Embassy in The Hague

Bisenberger said she learned of her mother's experiences in 2009 when a younger sister of her mother told her about it. The aunt was the only one to whom the mother revealed what happened because she wanted to spare her mother about the tragic story, Bisenberger said.

"My mother and her sister were raped while in a concentration camp in Moentilan. There was a church on this property and it was the former Xavier college. In this church happened the most horrible things during our captivity," Bisenberger said in the letter of what happened in January 1944.

The horrible experiences left deep scars on their hearts, she said. Her mother's sister even attempted suicide while in the concentration camp, but her mother saved the sister, Bisenberger said.

Bisenberger said that once a year she attends a rally that a group of Dutch people hold every second Tuesday of the month in front of the Japanese Embassy in The Hague.

"After the war, my mother always had nightmares, which never went away," she said. "When a war is over, it's never over for the victims who survive, which is very sad. Even the children will always wonder if the things they have in their heads were real. My mother always tried to erase them."

APP Editor: You can read more about Thea Bisenberger van der Wal's experiences on her blog, Coconut Connections.

Wednesday, July 16, 2014AM
12:00 At official residence (no visitors)
07:35 Depart from official residence
07:46 Arrive at JR Tokyo Station
07:56 Depart station on Hayabusa No. 101
09:30 Arrive at JR Sendai Station

WOMEN, PEACE AND SECURITY: PRACTICAL GUIDANCE ON USING LAW TO EMPOWER WOMEN IN POST-CONFLICT SYSTEMS. 8/27, 10:00-11:30pm. Sponsors: Women In International Security, Women's Action for New Directions, and the U.S. Institute of Peace. Speakers: Julie L. Arostegui, Toolkit Author and Director, Women, Peace and Security Policy, Women's Action for New Directions; Sanam Naraghi-Anderlini, Executive Director and Co-Founder, International Civil Society Action Network; Susan Stigant, Senior Program Officer, Rule of Law, US Institute of Peace; Susan Markham, Senior Gender Coordinator, USAID; and Chantal de Jonge Oudraat, President, Women in International Security.

PUBLIC OPINION AND WAR. 8/28, 2:00-4:00pm. Sponsor: Cato Institute. Speakers: Adam Berinsky, professor of political science, MIT; John Mueller, professor of political science, Ohio State University and senior fellow, Cato; Jason Reifler, senior lecturer, University of Exeter; Trevor Thrall, associate professor of public and international affairs, George Mason University; and Justin Logan, director of foreign policy studies, Cato.

Our institutions for governing world trade and our thinking about world trade date back to a simpler era. Without a radical rethink, we risk the gradual decay of our most valuable international institutions, loss of extraordinary opportunities to improve global living standards and possibly the sidelining of the West in developing modern institutions.

The GATT and the WTO were devised for a simpler era, when it was possible to think about world trade in the way Ricardo taught — namely that a good is produced in one country and consumed also in a single country. If Portugal was adeptat making wine and England at cloth, it would benefit both to reduce barriers and enhance trade. That two-country model worked relatively well until about 1978, when China started opening its economy by establishing special economic zones across the border from Hong Kong.

By the last decade of the twentieth century, production had become a complex global process. The logic of increasing efficiency by reducing trade barriers remained completely valid, but policy adaptation of that logic to a new era has faltered.

A laptop or a smart phone now is typically made in 15 to 20 countries. When old-style trade thinking is applied to this situation, confusion causes bad policy and gratuitous conflicts. A laptop made in 17 countries might be assembled in China for $2 worth of local wages then exported to the United States, but old two-country thinking leads members of Congress to react as if China had exported $1500 of value to the US. This bolsters protectionism, reduces support for multilateral trade liberalisation and contributes to the fragmentation of the global trade regime.

Because it is difficult to continue the process of trade liberalisation, countries feeling a need for deeper integration form their own regional blocs, inducing further fragmentation.

Regional and bilateral trade negotiations today are focused on ‘country of origin’, by definition a single country or preferential grouping, with the result that it is considered normal to have 500 pages of country of origin rules in a single trade agreement. Since each country has many trade agreements, companies may find the rules so complex that they simply pay high tariffs rather than trying to manage the complex paperwork to prove countries of origin. The complexity of the system discriminates against small, open economies like Singapore, and it discriminates against smaller companies without huge accounting departments. Because it cannot adapt to the globalisation of production, the system is beginning to defeat itself.

Moreover, the addition of over one billion new workers to the globalised workforce entailed very low wages in Eastern countries such as China, flat wages in the West and huge trade imbalances between East and West. This discouraged Western countries from vigorously pursuing the kinds of global agreements that would have eliminated those dozens of separate, conflicting 500-page rule books about countries of origin.

Feeling overwhelmed by Chinese manufactured exports, Western countries have also moved to exclude China from the most important efforts to modernise the global trading system. The proposed Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership agreements (TTIP) both seek to exclude the world’s second-largest economy from potential membership, an arrangement that is both economically untenable and a potential geopolitical disaster.

The geopolitical consequences were magnified by the inclusion of Japan in the TPP agreements, even though Japan’s economy is much less open than China’s and historically has been much less willing to reform in the face of domestic interest group pressure than China has. Given Sino-Japanese tensions, this has come across in Asia as part of a strategy to isolate China.

Magnifying Sino-American differences could make a more inclusive, truly multilateral future trade system much harder to negotiate.

While we still flounder over attempts to come to terms with globalised production, we are heading into globalised consumption. Instead of an era with one billion new globalised workers, we are heading into a world that will contain two billion or more new middle class consumers, mainly in Asia and heavily in China. Chinese wages are rising 13 to 20 per cent a year and total compensation is rising even more. This phenomenon should gradually resolve the most serious trade imbalances and begin to allow Western wages to rise.

But Western media, interest groups and politicians remain obsessed with the problems of yesterday. This could lead the West to squander one of the greatest economic opportunities in world history, namely the extraordinary consumer boom in China, India and other emerging markets. It could also disastrously delay responses to the jobs challenge of the new era: a technology-driven transformation of the workplace driven by robots, other automation, the internet of things and 3D printing that will eventually force billions of workers out of old jobs.

We must begin addressing the world as it is and will be, not the world of generations past. Ironically, in the process the WTO remains crucial to a vibrant world economy. Without the WTO’s dispute settlement mechanism, trade wars will ignite everywhere. By allowing the WTO system to decay, and by blaming globalised trade for problems that are unique to the past generation, we risk going back to pre-World War II trade wars. We need a modern, multilateral structure that updates the WTO, not a degeneration of the global trade and investment system based on a failure to recognise the shape of the new world we are entering.

We are now at one of those great historical turning points. Disillusionment, often misplaced, with existing institutions and obsession with obsolescent problems have allowed the process of trade negotiations to decay so far that TPP and TTIP negotiations could fail or, if they succeed, the exclusion of China could make them Pyrrhic victories. Continued Western failure to address the real issues of our emerging world of globalised production and consumption, and the reality of China’s central role, could lead to trade regimes with the most dynamic markets governed by structures like the Regional Comprehensive Economic Partnership promoted by Asian emerging economies.

The views expressed here are personal and not endorsed byDr. Overholt's employers.

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